GST Surrender or Cancellation: Things You Need To Learn

The Goods and Services Tax (GST) is a key part of India’s indirect tax system, and businesses that qualify must register and follow regular filing rules. However, not every GST Registration is permanent. Sometimes, a business needs to cancel it whether due to closing down, restructuring, or falling below the turnover limit. Understanding the right process and implications of GST cancellation is important for smooth compliance. In this blog, you will learn everything about GST surrender or cancellation.  

What is GST Cancellation or Surrender?

GST cancellation means officially deactivating a taxpayer’s GSTIN (Goods and Services Tax Identification Number). This ends their registration under the GST system. Once cancelled, the person or business can no longer collect GST, issue tax invoices, or claim input tax credit (ITC). They must also stop all activities that are taxable under GST rules, following the law properly.

On the other hand, GST Surrender is the act initiated voluntarily by the taxpayer, requesting the tax authorities to cancel their GST registration. While "cancellation" and "surrender" are often used interchangeably. Surrender technically refers to a voluntary application, and cancellation is the end result, whether initiated by the taxpayer, the department, or legal heirs.

Reasons for GST Cancellation

Under the Goods and Services Tax (GST) law, there are specific and well-defined circumstances in which a registered taxpayer may apply for cancellation, or where the authorities may initiate cancellation.

Here are the key reasons for GST Cancellation:

1. Discontinuance or Closure of Business

When a registered person permanently stops their business operations, GST registration becomes unnecessary and can be cancelled.

2. Transfer of Business

If a business is completely transferred through sale, merger, amalgamation, lease, or any other way, the old GST registration must be cancelled. The new owner or transferee must apply for fresh GST registration if needed.

3. Change in the Constitution of Business

When a business changes its legal structure, such as moving from a sole proprietorship to a partnership, it needs to cancel its existing GST registration. A fresh GST registration must be obtained for the new setup.

4. No Longer Liable for GST Registration

If the taxpayer's aggregate turnover falls below the prescribed threshold limit (Rs.40 lakh for goods suppliers, Rs. 20 lakh for service providers, subject to state-specific limits), they may apply for cancellation voluntarily.

5. Voluntary Registration Withdrawn

Taxpayers who registered for GST voluntarily under Section 25(3) of the CGST Act can apply for cancellation. If they later feel it is not needed, they can apply for cancellation, but only after completing one year.

6. Non-Compliance with GST Law (Cancellation by Officer)

The proper officer can initiate cancellation if:

1. The taxpayer does not conduct any business from the declared place of business.
2. Issues invoices without the actual supply of goods or services (fake invoicing).
3. Violates anti-profiteering provisions under GST.
4. If a taxpayer fails to file required GST returns for an extended period, 6 months for regular taxpayers or 3 consecutive tax periods for composition taxpayers, the GST registration may be cancelled.
5. Death of the Sole Proprietor

In the case of the death of a sole proprietor, the legal heir may apply for cancellation of the deceased’s GST registration.

Who Can Apply for GST Cancellation?

Under the Goods and Services Tax (GST) framework, various individuals and entities are eligible to apply for the cancellation of GST registration:

1. Registered Taxpayers: Any individual or business holding a valid GST registration may apply for cancellation if they are no longer liable to be registered under GST provisions.
2. Legal Heirs: If a sole proprietor passes away, their legal heir has the right to request cancellation of the GST registration.
3. Tax Authorities: The proper officer may initiate cancellation if the taxpayer fails to comply with GST laws, such as not conducting business from the declared place or issuing invoices without actual supply.

Types of GST Cancellation

Under the Goods and Services Tax (GST) framework, cancellation of registration can occur through the following types:

1. Voluntary Cancellation: Initiated by the taxpayer when they are no longer liable to be registered under GST, such as in cases of business closure, transfer, or change in the constitution of the business. The application is submitted using Form GST REG-16.
2. Suo-Moto Cancellation: Initiated by the tax authorities when a taxpayer contravenes provisions of the GST law, like non-filing of returns or not conducting business from the declared place. A show cause notice is issued, and the taxpayer is given an opportunity to respond before cancellation.
3. Cancellation by Legal Heirs: When a sole proprietor dies, their legal heir can step in and apply to cancel the GST registration linked to the deceased person.

Documents Required for GST Cancellation

Here is the list of documents required for GST Cancellation:

• GSTIN and PAN: Details of your GST Identification Number and Permanent Account Number.
• Business Closure Proof: Evidence supporting the cessation of business activities, such as a closure declaration or relevant documents.
• Authorized Signatory's Identity Proof: Identification documents (e.g., Aadhaar card, passport) of the person authorized to sign the cancellation application.
• Bank Account Details: Recent bank statements or a cancelled cheque to verify bank account information.
• Stock and Input Tax Credit (ITC) Details: Information on stock held and the corresponding ITC to be reversed or paid.

How to Cancel GST Registration?

Here is the step-by-step process for GST Registration:

Step 1: Access the GST Portal

Visit the official GST Portal and log in using your credentials to access your account and start the process.

Step 2: Navigate to Cancellation Application

To initiate the cancellation, go to the “Services” section, then select “Registration” followed by the option for “Application for Cancellation of Registration”.

Step 3: Complete the Application Form

The cancellation application form consists of three sections:

1. Basic Details: This section is automatically filled with your information.
2. Cancellation Details: You need to provide the reason for cancellation, desired cancellation date, and other necessary details.
3. Verification: Review all information and submit your application for cancellation.

Step 4: Submit the Application

Once you have completed all the required details, submit your application. A unique Application Reference Number (ARN) will be generated. You will also receive a confirmation notification on both your registered email and mobile number.

Step 5: Await Processing

The concerned tax officer will review your application. To track your application status, visit the GST Portal, choose the “Services” menu, and select “Registration,”. Then click on “Track Application Status” to view the current progress of your application.

Step 6: File Final Return (GSTR-10)

You need to file the final return, GSTR-10, within three months from the cancellation date or the order’s issue date. This return includes details about any stock on hand and the input tax credit that needs to be reversed.

Revocation of GST Cancellation

Under the Goods and Services Tax (GST) regime, a registered person's GST registration may be canceled by the proper officer on their own motion (suo moto). In these situations, the taxpayer can choose to request a reversal of the cancellation decision. Here is a detailed explanation:

1. Eligibility to Apply for Revocation

A registered person whose GST registration has been canceled by the proper officer on their own motion may apply for the revocation of the cancellation. But revocation requests are not accepted if the registration was canceled for not filing returns, unless certain conditions are met. It includes:

• All pending returns are filed.
• Any tax, interest, penalty, and late fees due in respect of those returns are paid.

Additionally, all returns due from the date of cancellation until the date of revocation must be filed within 30 days from the date of the revocation order. 

2. Time Frame for Filing the Application

Here is the time frame for filing the application:  

• Standard Period: The application for revocation must be filed in Form GST REG-21 within 90 days from the date of service of the cancellation order.
• Extension of Time Limit: If the application is filed beyond 30 days but within 90 days, the taxpayer may request an extension by providing reasons for the delay. The proper officer will forward this request to the jurisdictional Joint/Additional Commissioner for a decision. If the extension is granted, the taxpayer will be informed accordingly. 

3. Procedure for Filing the Application

To apply for the revocation of cancellation:

1. Visit the GST Portal

Navigate to the official GST portal. Ensure you are accessing the official site to maintain security and authenticity during the application process.?

2. Login Using Your Credentials

To log in, enter your GSTIN and password on the portal’s login page. If you have forgotten them, simply click on “Forgot Username” or “Forgot Password” to retrieve your credentials.

3. Navigate to Revocation Application

Once logged in, go to Services > Registration > Application for Revocation of Cancellation of Registration. This section allows you to initiate the process to reinstate your cancelled GST registration.?

4. Fill in the Required Details

In the application form, provide the reason for seeking revocation and upload any supporting documents. Double-check all details for accuracy to prevent any delays in processing.

5. Submit the Application

After filling in the details, select the verification checkbox, choose the authorized signatory, and specify the place of filing. Submit the application using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).?

6. Track Application Status

Post-submission, you can monitor the status of your application by navigating to Services > Registration > Track Application Status. This feature provides updates on the progress of your revocation request.

4. Officer's Action on the Application

Upon receiving the application:

• Revocation: If the tax officer finds enough reason to allow revocation, they will pass an order in Form GST REG-22. You must complete this within 30 days from the date the application is received.
• Rejection: If the application is insufficient, the officer may reject it by issuing a Form GST REG-05 order.

This provides reasons for the rejection. 

5. Post-Revocation Compliance

After the revocation order is issued:

• Return Filing: The taxpayer must submit any overdue GST returns for the period between the cancellation and revocation dates. These returns should be filed within 30 days from the date of the revocation order.
• Tax Liabilities: Any outstanding tax liabilities, interest, penalty, and late fees must be cleared.
• GSTIN Status: The GST Identification Number (GSTIN) status will be updated to 'Active' upon successful revocation.

Conclusion

Cancelling or surrendering a GST registration is an important compliance action when a business shuts down or no longer qualifies for registration. Following the correct process ensures smooth closure, prevents legal issues, and maintains a clean tax record. Understanding the reasons, procedure, and post-cancellation duties is essential for every taxpayer. If you have any queries regarding GST surrender or cancellation, contact Online Legal India to get assistance.

FAQs on GST Surrender or Cancellation

Q1. Can I cancel my GST registration if my turnover falls below the limit?

Yes, you can voluntarily apply for cancellation if your aggregate turnover falls below the mandatory threshold.

Q2. Is GST cancellation automatic if I close my business?

No, you must apply for cancellation through the GST portal. It is not automatic.

Q3. How long does it take to cancel GST registration?

Typically, if all documents are in order, the cancellation order is issued within 30 days.

Q4. What happens if I don’t file the final return?

Non-filing of Form GSTR-10 can lead to penalties and prevent the complete closure of the GST account.

Q5. Can I register again after cancellation?

Yes, you can apply for a new GST registration in the future if your turnover or business circumstances require it.